A comparison of dynamic hazard models and static models for predicting the special treatment of stocks in China with comprehensive variables

Zhou, Ligang

doi:10.1057/jors.2014.71

Cited by 7 publications

(3 citation statements)

References 32 publications

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“…Moreover, the dynamic hazard model does not have problems such as selection bias, non-adjustment of the period at risk and no account of duration dependence or age of the firm. Such weaknesses are common in static or single-period models (Shumway, 2001; Sun and Li, 2011; Zhou, 2015).…”

Section: Literature Reviewmentioning

confidence: 99%

Can board diversity predict the risk of financial distress?

Yousaf

Jebran

Wang

2021

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Purpose The purpose of this study is to explore whether different board diversity attributes (corporate governance aspect) can be used to predict financial distress. This study also aims to identify what type of prediction models are more applicable to capture board diversity along with conventional predictors. Design/methodology/approach This study used Chinese A-listed companies during 2007–2016. Board diversity dimensions of gender, age, education, expertise and independence are categorized into three broad categories; relation-oriented diversity (age and gender), task-oriented diversity (expertise and education) and structural diversity (independence). The data is divided into test and validation sets. Six statistical and machine learning models that included logistic regression, dynamic hazard, K-nearest neighbor, random forest (RF), bagging and boosting were compared on Type I errors, Type II errors, accuracy and area under the curve. Findings The results indicate that board diversity attributes can significantly predict the financial distress of firms. Overall, the machine learning models perform better and the best model in terms of Type I error and accuracy is RF. Practical implications This study not only highlights symptoms but also causes of financial distress, which are deeply rooted in weak corporate governance. The result of the study can be used in future credit risk assessment by incorporating board diversity attributes. The study has implications for academicians, practitioners and nomination committees. Originality/value To the best of the authors’ knowledge, this study is the first to comprehensively investigate how different attributes of diversity can predict financial distress in Chinese firms. Further, this study also explores, which financial distress prediction models can show better predictive power.

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Section: Literature Reviewmentioning

confidence: 99%

Can board diversity predict the risk of financial distress?

Yousaf

Jebran

Wang

2021

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“…Third, the current study failed to rule out market-driven variables in assessing the effects of news coverage articles about security incidents on the stock prices of a firm. Stock prices are indicators of information on the efficient financial market, thus are termed as market variables derived from trading information; there is variability in the effects of market variables depending on the types of markets, possibly due to the different efficiency levels of different markets (Zhou 2015;Zhou et al 2015).…”

Section: Discussionmentioning

confidence: 99%

A Pilot Study to Assess the Effects of News Coverage Articles about Security Incidents on Stock Prices in Korea

Han

2023

JRFM

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This study was conducted to assess the effects of security incidents on the stock prices of firms in Korea. A content analysis of news coverage articles about security incidents was performed. The research questions (RQs) of the current study were as follows: RQ1: this study evaluated whether the news coverage of a security incident can influence an investor’s decision to buy or sell a stock; and RQ2: the study also analyzed whether the type of industry, the amount of damage caused by the incident, and the specific security incident itself would affect how investors assessed a stock’s value. The results of the study indicate the following: (1) news coverage articles about security incidents have a significant effect on stock prices; and (2) the degree of such an effect varies depending on the tone, theme, and category of the news coverage. A more negative tone was associated with a decrease in stock prices. Less negative and neutral tones were associated with an increase in stock prices. In particular, a neutral tone was associated with an increase in stock prices, which was commonly seen in most of the firms experiencing security incidents. Furthermore, the number of news coverage articles about security incidents had no relationship to variations in stock prices. In firms experiencing security incidents, variations in stock prices varied depending on the types of industry, the types of damages, and the type of incident. In conclusion, the current study used an event study and a content analysis of news coverage articles about security incidents to assess their effects on the stock prices of firms. Further studies are warranted to establish the feasibility of this approach in a real-world setting.

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“…In sum, in the Chinese stock market, the *ST label indicates both the current decline of a company's performance and the high risk of its failure in the near future. As such, a company's *ST designation is a strong and publicly accessible signal indicating decline (Zhou, ). Moreover, since the *ST designation only occurs after 2 consecutive years of financial losses, it allows executives to proactively jump ship before the designation is attached.…”

Section: Methodsmentioning

confidence: 99%

Choose to Fight or Choose to Flee? A Network Embeddedness Perspective of Executive Ship Jumping in Declining Firms

Jiang

Cannella

Xia

et al. 2017

Strategic Management Journal

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Research summary: Executives in declining firms may engage in ship-jumping behavior (i.e., voluntarily move to new employers before the failure occurs) to avoid the stigma of failure. However, it is unclear how executives decide whether or not to jump ship. Building on a network embeddedness perspective, we highlight how three network-based indicators (i.e., executive social capital, the social capital of other peers in the declining firm, and the declining firm's alliance network) influence the executive-level ship-jumping decision by shaping its benefits and opportunity costs. Using data from executives at failing firms in China, we find support for our hypothesized relationships. Our research provides important insight into the network mechanisms driving the ship-jumping decision.Managerial summary: Executives at failing firms have a choice: stay and attempt to rescue the firm from failure or exit and avoid the stigma of the failure (i.e., jump ship). Yet, little is known about what factors affect this choice. We propose that social capital plays an important role in the decision. Our evidence from specially treated (*ST) public firms in China finds that ship jumping is lowest at low and high values of social capital, and highest at moderate levels of social capital (an inverted U-shaped relationship). In addition, higher levels of peer social capital (in the declining firm) as well as a well-established firm-level alliance network discourage the ship-jumping choice.Note. We report SHR and Z-scores based on robust standard errors. SHRs lower than 1 indicate that increases in independent variables decrease the hazard rate, and those greater than 1 indicate that increases in independent variables increase the hazard rate. The number 1 indicates no change. SHR = Subdistribution Hazard Ratio. The bolded values highlight the results that parallel with our main findings.

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A comparison of dynamic hazard models and static models for predicting the special treatment of stocks in China with comprehensive variables

Cited by 7 publications

References 32 publications

Can board diversity predict the risk of financial distress?

Can board diversity predict the risk of financial distress?

A Pilot Study to Assess the Effects of News Coverage Articles about Security Incidents on Stock Prices in Korea

Choose to Fight or Choose to Flee? A Network Embeddedness Perspective of Executive Ship Jumping in Declining Firms

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